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Nippon Steel goes on offensive as Chinese industry retreats

2018-01-11

Asia Nikkei reported that Japan's largest steelmaker, Nippon Steel & Sumitomo Metal, is roaring toward 72% operating profit growth for the fiscal year ending this March, expecting to log CNY 300 billion (USD 2.64 billion) as it is churning out most of its steel products at full capacity. This is a dramatic turnaround for a company that was struggling mightily only a year ago, with its steel business falling into the red for the first time in four years. Still, as President Mr Kosei Shindo maps out the midterm plan scheduled to kick off this spring, he may be wondering how much of the robust growth is due to the company's own strength, and how much stems from Chinese state policy.

Much of Nippon Steel's recovery is owed to the fact that Chinese steelmakers which account for half the world's crude steel production ceased exports of cut-rate products. Mr Shindo admitted that "The end of China's excess production will favorably affect our industry."

In response to repeated calls from Japan, the US and European countries for China to end its excess steel output, the Chinese government became serious about cutbacks in 2016. By this past June, it had fully eliminated production of inferior-quality, illegally produced steel products known as detiaogang in Chinese.

Mr Shindo, commended that Chinese government's efforts to cut more than 200 million tonnes of capacity, said that "They have lived up to the expectations of the world." He believes that current trends will "remain stable," as the Chinese economy is controlled by the government.